Top executives rarely go to court over criminal charges, but the Department of Justice refuses to back down after a December mistrial.
It’s not often that the U.S. Justice Department slaps criminal charges on a group of top corporate executives and takes them all the way to court – twice. But after a jury failed to determine guilt or innocence in December, the second trial of 10 poultry industry leaders for alleged price-fixing is scheduled to begin Tuesday in Denver.
Five of the defendants are former executives at Pilgrim’s Pride, the second-biggest U.S. poultry producer. They include two CEOs: Jayson Penn, who headed Pilgrim’s Pride until 2020, and William Lovette, who led the company from 2011 until Penn took over in 2019. The former president of Georgia-based Claxton Family Farms and ex-executives from Tyson Foods, Koch Foods, Case Farms and George’s Inc. are also charged.
The government says that the executives worked together to keep prices paid to poultry farmers low while raising costs for consumers at grocery stores and restaurant chains. The scheme, the government says, impacted sales at Pilgrim’s Pride by $361 million – more than $1 for every American.
The defendants deny guilt. In the seven-week trial that ended in December, lawyers for the 10 co-defendants were able to convince jury members that a key government witness was unreliable and the proceedings ended in a mistrial.
The case comes as inflation has roared to its highest level in 40 years. Meat-packing companies in general are under heightened scrutiny for what the Biden administration and some independent producers call “pandemic profiteering” as farmers’ and ranchers’ portions of industry revenue haven’t kept pace with higher retail prices.
“Cartels make a lot of money, even after you deduct what they have to pay out for damages,” says Peter Carstensen, a professor of law emeritus at the University of Wisconsin-Madison. “If the government can’t win a criminal conviction here, it will significantly decrease the probability of more criminal cases.”
The case is one result of a sweeping Justice Department probe into alleged antitrust violations in the meatpacking industry that’s looking at activity dating back to the early 2000s.
In October 2020, Pilgrim’s Pride pled guilty to “a conspiracy to suppress and eliminate competition” in chicken sales and paid $107 million in a settlement with the Justice Department over price-fixing charges.
Pilgrim’s Pride parent company JBS said that Pilgrim’s Pride resolved the issue with the government and that JBS is not a party in the current trial. “We continue to cooperate with the government and remain focused on maintaining our commitment to fair and honest competition in compliance with U.S. antitrust laws,” a JBS spokesperson said.
Without admitting guilt, Pilgrim’s Pride has also agreed to pay $75 million to settle similar charges with different class-action groups like McDonald’s, Walmart and other fast-food chains, distributors and retailers.
Tyson Foods, the country’s biggest chicken processor, also faces lawsuits over price-fixing and collusion. In January 2021, Tyson settled a class action over chicken for $221.5 million while denying wrongdoing. Six other chicken packagers have also settled, while more than 10 others continue to fight the charges. Hundreds of other lawsuits related to these claims will continue to play out in the court system for years.
In the criminal case, the Justice Department says that chicken executives aligned bids and promotional discounts through phone calls, text messages and in-person meetings between 2012 and 2019, as well as monitored co-conspirators’ bids. The executives also used data aggregators that shared proprietary information that, while anonymized, is easily reconstructed.
“Cartels make a lot of money, even after you deduct what they have to pay out for damages.”
The executives are charged with felony violations of the Sherman Act, America’s main antitrust law, which outlines severe criminal penalties to prevent price-fixing. The law dictates a maximum sentence of 10 years in prison and a fine of $1 million for individuals.
The trial and the chicken industry’s settlements could impact similar allegations of price-fixing and collusion among pork and beef processors. Thanks to corporate consolidation, some of the beef and pork companies being sued have the same parent companies as the chicken processors. Pilgrim’s Pride is a publicly traded company backed by JBS through a majority stake.
JBS has settled cases in pork and beef. JBS agreed to pay $57 million in class-action settlements over pork without admitting guilt. Earlier this month, JBS announced it will pay $52.5 million to settle a beef price-fixing class-action suit with one of three customer groups, also without any admission of guilt.
MORE FROM FORBES
MORE FROM FORBESHow A NFT Pivot Turned A Tiny Mobile Game Company Into Multi-Billion Dollar PowerhouseBy Justin Birnbaum
MORE FROM FORBESAmericans’ Response To Inflation Is Not What Many ExpectedBy Lauren Debter
MORE FROM FORBESHow The Russians Crush Ukraine, And How Ukraine Thwarts ThemBy David Axe
MORE FROM FORBESThe Pandemic Crushed Most Movie Theaters-But This 27-Year-Old’s Chain Doubled In SizeBy Christopher Helman